Bitcoins Will Be Exempt from VAT

A regular session of the final judicial authorities of the EU, Supreme Court, took place last week in Luxembourg. One of the matters in point concerned cryptocurrency Bitcoin. Sweden initiated the investigation as its fiscal police insisted on imposition of VAT on all Bitcoin operations.
Bitcoins and VAT: Paths Differ More and More
   Quite recently operations with crypocurrency Bitcoin were exempted from VAT in Great Britain, Germany and Spain. ‘Currency as a medium of payment, in other words, a financial instrument which is not a product or a service, must not be taxable with VAT’ said resolution of the EU Directorate on Taxes and Customs.
   As for the action of the Swedish Tax Department, the EU Court of Justice made an interlocutory decision in favor of Bitcoin. Operations with cryptocurrency will be exempted from VAT. According to some experts, if the final decision will coincide with the interlocutory one, Bitcoin will be exempted from VAT in most of the EU countries.
   Representatives of Swedish government service were not satisfied with the interlocutory decision of the EU Court of Justice. By the time of retrial, the date of which is unclear till now, Swedish taxmen plan to present weighty arguments for applying VAT to Bitcoin operations. The Tax Inspectorate of Sweden considers that extension of Bitcoin operations must not stay “unpaid” for the federal budget.
Bitcoin and VAT in Russia
At the moment cryptocurrency does not have a specified status in Russia. The Central Bank does not recognize Bitcoin, therefore, cryptocurrency cannot be accepted as an official payment instrument. However, financial operations with Bitcoin are not prohibited in our country. Regardless to their location system’s users are able to operate with cryptocurrency worldwide, including Russian market.
Unofficial status of cryptocurrency in Russia, or rather, lack of any status, allows staying unconcerned about taxation of Bitcoin operations. On the other side, gradual changes of the Central Bank’s attitude towards cryptocurrencies set us thinking about future perspectives. Maybe, in the nearest future the question about applying VAT to Bitcoin will arise in our country as well.
The scale of Bitcoin circulation in Russia, of course, is incomparable with the scale of operations in European countries. This cryptocurrency is not so much influential in Russian market. Though, we cannot deny steady increase in cryptocurrency transactions in Russia. Maybe, the increase is not as rapid as in other countries, however it is obvious.
E-currency and Taxes
   Imposition of VAT on operations with cryptocurrencies is not expected in the nearest time just because the Central Bank hasn’t made a decision on Bitcoin. Some experts predict dramatic changes in case the Central Bank will ratify Bitcoin as an official financial instrument.
   Changes might include tax office’s attitude towards electronic payment systems and most notably, Bitcoin. Today the tax office’s policy towards e-currencies is clear. But we cannot be sure it will be the same in the future. The key objective of tax offices is to fill up the federal budget by any means. Therefore, it’s hard to believe that the increasing amount of Bitcoin transactions will stay out of eyeshot of taxmen.
It is possible that at scale of Europe all fuss about applying VAT to cryptocurrency operations will not affect our country. Bitcoin is out of geographical boundaries, and it’s good. Though, users are in doubts about decisions of their country’s authorities – non-recognition of laws is fraught with distressing consequences. There is a chance that VAT and Bitcoin in Russia will not collide, however we cannot ignore such a scenario.
   In the meantime, users of Russian segment of Bitcoin may rest assured. In the nearest time no any radical changes are expected. Although the Central Bank’s attitude towards e-currencies is changing, it is unlikely that there will be any global movements. Recognition of cryptocurrency as an official financial instrument might lead to some innovations, however, the legislation is not ready yet as there are no specific regulations for e-money circulation on a par with real money.
   The legislative process is not quick in our country. Therefore, the implementation of VAT to Bitcoin exchange is unlikely. Maybe someday Tax Inspectorate will become aware of an issue, but not today. Let’s wait for the Central Bank’s decisions in the matter of Bitcoin. We don’t agree with an opinion that e-currencies will never circulate in the market as real money. A reality is: we pay more in the Internet by e-currencies than offline by cash. So, Bitcoin cannot be always discarded.